ANNALY CAPITAL MANAGEMENT INC

The following table presents financial information related to our results of operations as of and for the three and nine months ended September 30, 2024 and 2023.

* Represents a non-GAAP financial measure. Refer to the “Non-GAAP Financial Measures” section for additional information.(1) GAAP leverage is computed as the sum of repurchase agreements, other secured financing, debt issued by securitization vehicles, participations issued and U.S. Treasury securities sold, not yet purchased divided by total equity. Economic leverage is computed as the sum of recourse debt, cost basis of to-be-announced (“TBA”) and CMBX derivatives outstanding, and net forward purchases (sales) of investments divided by total equity. Recourse debt consists of repurchase agreements, other secured financing, and U.S. Treasury securities sold, not yet purchased. Debt issued by securitization vehicles and participations issued are non-recourse to us and are excluded from economic leverage.(2) GAAP capital ratio is computed as total equity divided by total assets. Economic capital ratio is computed as total equity divided by total economic assets. Total economic assets include the implied market value of TBA derivatives and net of debt issued by securitization vehicles.(3) Annualized GAAP return (loss) on average equity annualizes realized and unrealized gains and (losses) which may not be indicative of full year performance, unannualized GAAP return (loss) on average equity is 0.69%, and (5.04%) for the three months ended September 30, 2024 and 2023, respectively, and 4.62% and (10.88%) for the the nine months ended September 30, 2024 and 2023, respectively.(4) Net interest margin represents our interest income less interest expense divided by the average interest earning assets. Net interest margin does not include net interest component of interest rate swaps. Net interest margin (excluding PAA) represents the sum of our interest income (excluding PAA) plus TBA dollar roll income and CMBX coupon income less economic interest expense divided by the sum of average interest earning assets plus average outstanding TBA contract and CMBX balances.(5) Average yield on interest earning assets represents annualized interest income divided by average interest earning assets. Average interest earning assets reflects the average amortized cost of our investments during the period. Average yield on interest earning assets (excluding PAA) is calculated using annualized interest income (excluding PAA).(6) Average GAAP cost of interest bearing liabilities represents annualized interest expense divided by average interest bearing liabilities. Average interest bearing liabilities reflects the average balances during the period. Average economic cost of interest bearing liabilities represents annualized economic interest expense divided by average interest bearing liabilities. Economic interest expense is comprised of GAAP interest expense, the net interest component of interest rate swaps, and, beginning with the quarter ended June 30, 2024, net interest on initial margin related to interest rate swaps, which is reported in Other, net in the Company’s Consolidated Statement of Comprehensive Income (Loss). Prior period results have not been adjusted in accordance with this change as the impact is not material. Net interest on variation margin related to interest rate swaps was previously and is currently included in the Net interest component of interest rate swaps in the Company's Consolidated Statement of Comprehensive Income (Loss) for all periods presented.(7) Excludes dividends on preferred stock.

GAAP

Net income (loss) was $82.4 million, which includes $15.9 million attributable to noncontrolling interests, or $0.05 per average basic common share, for the three months ended September 30, 2024, compared to ($569.1) million, which includes ($6.9) million attributable to noncontrolling interests, or ($1.21) per average basic common share, for the same period in 2023. We attribute the majority of the change in net income (loss) to favorable changes in net gains (losses) on investments and other, net interest income, and net servicing income, partially offset by an unfavorable change in net gains (losses) on derivatives. Net gains (losses) on investments and other was $1.7 billion for the three months ended September 30, 2024 compared to ($2.7) billion for the same period in 2023. Net interest income for the three months ended September 30, 2024 was $13.4 million compared to ($45.3) million for the same period in 2023. Net servicing income for the three months ended September 30, 2024 was $109.6 million compared to $88.0 million for the same period in 2023. Net gains (losses) on derivatives was ($1.8) billion for the three months ended September 30, 2024 compared to $2.1 billion for the same period in 2023.

Net income (loss) was $538.7 million, which includes $18.8 million attributable to noncontrolling interests, or $0.80 per average basic common share, for the nine months ended September 30, 2024 compared to ($1.2) billion, which includes ($7.8) million attributable to noncontrolling interests, or ($2.73) per average basic common share, for the same period in 2023. We attribute the majority of the change in net income (loss) to favorable changes in net gains (losses) on investments and other, net interest income, and net servicing income, partially offset by an unfavorable change in net gains (losses) on derivatives. Net gains (losses) on investments and other was $160.8 million for the nine months ended September 30, 2024 compared to ($4.0) billion for the same period in 2023. Net interest income for the nine months ended September 30, 2024 was $60.5 million compared to ($57.8) million for the same period in 2023. Net servicing income for the nine months ended September 30, 2024 was $320.4 million compared to $239.3 million for the same period in 2023. Net gains on derivatives for the nine months ended September 30, 2024 was $53.6 million compared to $2.7 billion for the same period in 2023. Refer to the section titled “Other income (loss)” located within this Item 2 for additional information related to these changes.

Non-GAAP

Earnings available for distribution were $382.5 million, or $0.66 per average common share, for the three months ended September 30, 2024 compared to $362.0 million, or $0.66 per average common share, for the same period in 2023. The change in earnings available for distribution during the three months ended September 30, 2024, compared to the same period in 2023, was primarily due to higher coupon income, resulting from higher residential mortgage loan and reverse repurchase agreement balances and purchasing securities higher up in the coupon stack, and higher net servicing income. This change was partially offset by higher interest expense from an increase in average borrowing rates and average interest bearing liabilities, and an unfavorable change in the net interest component of interest rate swaps.

Earnings available for distribution were $1.1 billion, or $1.98 per average common share, for the nine months ended September 30, 2024, compared to $1.2 billion, or $2.18 per average common share, for the same period in 2023. The change in earnings available for distribution during the nine months ended September 30, 2024, compared to the same period in 2023, was primarily due to higher interest expense from an increase in average borrowing rates and average interest bearing liabilities and an unfavorable change in the net interest component of interest rate swaps. This change was partially offset by higher coupon income, resulting from increased residential mortgage loan balances, purchasing securities higher up in the coupon stack, lower premium amortization expense, excluding PAA, and higher net servicing income.